Illinois bill would “claw back” subsidies from companies who leave

JOLIET, Ill. — While Donald Trump bribes companies to stay in the U.S. with no assurance they will, Democrats in the Illinois state legislature have introduced a bill to rescind forever state subsidies to firms that promise to create jobs, grab tax dollars, and then leave.

For years, across the nation state and local governments have been giving huge tax breaks to lure firms to set up business in their jurisdiction with no guarantees that the businesses will stay put.

For example, to keep the Carrier air conditioner company from sending jobs from Indiana to Mexico, Trump bribed the firm with $7 million in tax incentives. And did not ask for a commitment for the outfit to stay.

Countering this trend, Illinois State Rep. Michael Halpin and several other Democrats, have introduced the Keep Illinois Business Act, which “provides that any recipient business that chooses to move all or part of its business operations and the jobs created by its business out-of-state shall be deemed to no longer qualify for state economic development assistance, and shall be required to pay to the relevant state granting agency the full amount of any economic development assistance it received.”

While there are such “claw back” measures in other states, the Halpin measure is the only one so far that would bar wayward firms from getting any future subsidies.

“Illinois workers and jobs need to be prioritized over corporate profits. It’s unacceptable that companies received tax credits to incentivize job creation, then proceeded to send the jobs out of state. They must be held accountable,” Rep. Larry Walsh, one of the bill’s co-sponsors, said in a statement.

The move to claw back public subsidies is being led by union-backed Good Jobs First, which has spent years tracking the amount of money each state’s taxpayers give away in tax breaks, infrastructure investment, state-backed loans and other subsidies.

“When a company signs a subsidy deal, it typically promises to deliver a set of public benefits,” a Good Jobs First fact sheet says.

“For example, a company may state on its subsidy application that it will invest $1 million in a new plant projected to employ 100 people full time at $20 per hour. If that company fails to follow through on the investment, number of jobs, employment hours, or wage rate in a specified amount of time, and the subsidy deal has a claw back provision, the company must forfeit or repay all or part of its subsidies to the state or local government that awarded them.

“Claw backs provide taxpayers a way of making sure their investment in development subsidies pays off in the form of real public benefits and allow governments to recoup their money if it does not.

“The concept of a claw back may seem like common sense,” the fact sheet continues. “But with the way many subsidy deals are currently structured, companies often face no penalties if they fail to deliver on promised jobs or investment … Governments often take a ‘good faith’ approach, assuming the company has done and will continue to do its best, and letting it off the hook if it falls short.

“The result of such lax enforcement is that taxpayers end up subsidizing companies for things they don’t do … In some cases, subsidies have gone to companies that later eliminated jobs, closed up shop entirely, or moved to other states, literally taking the money and running.”

Halpin’s legislation, may, if passed, apply to one of the nation’s biggest and most-prominent corporations: Amazon.com.

“Subsidizing companies with the state personal income taxes of their employees is terrible public policy,” says Good Jobs First Executive Director Greg LeRoy, a Chicago native. “For a fiscally strapped state like Illinois, giving up an elastic source of revenue that would best help the state sustain public services will only make its deficit worse.”

CONTRIBUTOR

Mark Gruenberg is head of the Washington, D.C., bureau of People's World. He is also the editor of Press Associates Inc. (PAI), a union news service in Washington, D.C. that he has headed since 1999. Previously, he worked as Washington correspondent for the Ottaway News Service, as Port Jervis bureau chief for the Middletown, NY Times Herald Record, and as a researcher and writer for Congressional Quarterly. Mark obtained his BA in public policy from the University of Chicago and worked as the University of Chicago correspondent for the Chicago Daily News.